Energy Market Analysis - 25-02-2013

Friday's strong demand and lower pipeline flows led to a tightening in the UK gas system, which helped to push NBP spot and near curve prices higher. Friday's OTC markets didn't anticipate for a higher level of tension on the French market for power delivered today. As such, there is a gap of over â‚¬20/MWh between OTC and exchange French prices this morning. This can be put down to cold weather having more of an impact on French demand than it has had on German demand.

How did the energy markets close on Friday?

Day-Ahead gas saw a gain of 0.75ppt from its opening level on Friday; which can be linked to colder weather predictions and a tight UK system. What's more, following the news of reduced output from a Norwegian gas field, prices took a bullish direction again. Power's prompt prices saw a rise during Friday's trading, with Day-Ahead jumping £1.00/MWh to close at exactly £54.00/MWh. Elsewhere; a Scottish nuclear plant was taken offline during the day, helping the System Buy Price to a maximum of £152/MWh.

How did the energy markets open?

This morning saw a rally in the gas curve, with Day-Ahead jumping up almost 3.00ppt and Front-Month rising 0.50ppt. In other news, Rough (the UK's largest gas storage facility), is planning to run at half capacity at the beginning of March - but maintenance is only expected to last for 24 hours. Power's Day-Ahead rocketed £4.50/MWh higher than its Friday close level, while Front-Month April13 crept up £0.40/MWh despite lower API2 coal price.

1-year forward prices

Both 1-year forward prices for business gas and business electricity saw a rise following Friday's market close data. This small rise can be seen in the graph below.

Latest Brent Crude Oil prices

There was a slight rebound for Brent 1st-nearby on Friday, which was helped on by gains on gasoline. Despite this, it failed to close higher than $114.3/bbl (its key resistance). Friday's IFO survey fuelled overall risk appetite, but news about lower-than-expected reimbursements of LTRO coupled with European Commission forecasts and the downgrading of the UK debt rating failed to reassure. Strength on equity markets could see Brent prices rise to $114.75/bbl this morning, but any further movements will hinge on this afternoon's Italian elections. Results of these elections could send prices back to $115.95/bbl or down to $113.3/bbl. We aren't expecting any other big movements today as we await news on discussions between Iran and P5-1 tomorrow on the nuclear program. Note: Brent Crude prices are taken from opening market data, and do not represent the price as it changes throughout the day.